Correlation Between Balchem and Belden

Can any of the company-specific risk be diversified away by investing in both Balchem and Belden at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Balchem and Belden into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Balchem and Belden Inc, you can compare the effects of market volatilities on Balchem and Belden and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Balchem with a short position of Belden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balchem and Belden.

Diversification Opportunities for Balchem and Belden

0.7

Correlation Coefficient

Balchem  Belden

Poor diversification

The 3 months correlation between Balchem and Belden is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Balchem and Belden Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Belden Inc and Balchem is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Balchem are associated (or correlated) with Belden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Belden Inc has no effect on the direction of Balchem i.e., Balchem and Belden go up and down completely randomly.

Pair Corralation between Balchem and Belden

Given the investment horizon of 90 days Balchem is expected to under-perform the Belden. But the stock apears to be less risky and, when comparing its historical volatility, Balchem is 1.51 times less risky than Belden. The stock trades about -0.05 of its potential returns per unit of risk. The Belden Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11,650  in Belden Inc on October 25, 2024 and sell it today you would earn a total of  557.00  from holding Belden Inc or generate 4.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Balchem  vs.  Belden Inc

Balchem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Balchem has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Balchem is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Belden Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Belden Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Belden is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Balchem and Belden

The main advantage of trading using opposite Balchem and Belden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balchem position performs unexpectedly, Belden can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Belden will offset losses from the drop in Belden's long position.

The idea behind Balchem and Belden Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.